Unilever, McCormick near deal to create $60 billion food business

By Richa Naidu and Yadarisa Shabong

LONDON, March 31 (Reuters) – Unilever said on Tuesday it was in advanced talks to combine its food business with spice maker McCormick in a potential deal that would deliver $15.7 billion in cash and give shareholders majority control of the merged entity.

If completed, the transaction would be structured as a so-called Reverse Morris Trust, which offers tax benefits. Unilever would spin off the division and then merge it with the Cholula hot sauce owner. It is expected that Unilever shareholders would retain a 65% stake in the combined entity.

Analysts at Barclays valued Unilever’s food business at between 28 billion euros ($32.10 billion) and 31 billion euros, including debt. That, combined with McCormick’s $14.2 billion market capitalization and the $15.7 billion in cash could value a new combined entity at over $60 billion.

The potential deal marks Fernando Fernandez’ biggest move yet since taking the helm at Unilever in March 2025 and comes after he completed the spin-off last year of Unilever’s multi-billion euro ice cream business, home to Ben & Jerry’s and Magnum.

Though Unilever’s food unit is a high-margin business, sales growth has lagged the company’s personal goods and beauty businesses and weighed on its ambition to increase overall group sales by 4%-6% in the near term.

“Work remains ongoing to agree and finalise a transaction and it is possible that an agreement could be concluded today, although there can be no certainty that a transaction will be agreed,” Unilever said in a statement on the talks with McCormick.

Unilever said the proposed combination of its foods business would exclude certain assets, including its operations in India.

The company has been under investor pressure to shed food brands for years, increasingly so after it was revealed in 2022 that billionaire activist-shareholder Nelson Peltz had built a stake in Unilever. Peltz has been linked to the departure of two CEOs, Alan Jope and Hein Schumacher, who investors felt were not streamlining Unilever’s portfolio fast enough.

The deal with McCormick comes on top of an ongoing cost-cutting programme Unilever has had in place since 2024, meant to save around 800 million euros in costs over the next three years.

“Evaluating the transaction will necessitate more details on synergies and how the company will deal with stranded costs, with news today that it has implemented a global hiring freeze amid the war impact, which may affect sentiment on current trading,” JPMorgan analysts wrote in a note.

Reuters reported exclusively on Monday that Unilever last week implemented a global hiring freeze “at all levels” that will last at least three months, citing ‌the effects of the widening conflict in the Middle East.

Shares in Unilever, which have fallen more than 7% in the past year, were up 0.9% in early trade on Tuesday.

FROM MARGARINE TO SOAP

Unilever traces its roots in the food sector to 1860, when one of its Dutch founding families began building up its business in the butter trade. Unilever itself was created in 1929 when Margarine Unie and Lever Brothers joined in what was at the time one of the biggest industrial mergers ever in Europe.

Now, the company’s food business accounted for just over a quarter of its overall annual sales of 50.5 billion euros last year, and a significant portion of its 96,000 employees around the world.

In Europe and Britain alone, nearly 5,000 people work in Unilever’s food business, one senior executive told Reuters – or just under a third of the region’s employees. In Germany and Austria, for instance, about half the workforce is with the food business, the source said.

Unilever has spent most of the last century snapping up food and beverage brands from Marmite to Colman’s and Horlick’s – until the past decade when many shoppers started shying away from packaged food in favour of fresh groceries that are seen as healthier. 

The rise of GLP-1 weight loss drugs in recent years has further eroded demand and investors’ faith in packaged food, especially due to stiff competition from cheaper private label brands that make similar products.

Over the past year, Unilever has divested several non-core food assets, including snack brand Graze and plant-based meat brand The Vegetarian Butcher.

“The direction of travel makes sense, for Unilever to focus on higher growth categories, but at this stage we need to see the details of any deal, including all advantages and disadvantages, to assess if sufficient value is being created for shareholders in the medium to long term,” said Tineke Frikkee, a portfolio manager at W1M, a Unilever investor.

($1 = 0.8724 euros)

(Reporting by Yadarisa Shabong, Prerna Bedi in Bengaluru and Richa Naidu in London; Editing by Sherry Jacob-Phillips and Susan Fenton)